National Pension Scheme: Tax advantage: Employer-Employee Benefit: Retirement Planning

1. NPS(NATIONAL PENSION SCHEME)
19TH JAN , 2018,FRIDAY:
B-1111, MONDEAL
HEIGHTS,AHMEDABAD
CA NITIN PATHAK
F.C.A ,CISA, CISM,CIA, CISSP(USA)
DISA(ICAI) ,DIRM(ICAI) ,SAP(FICO)
CERTIFICATION COURSE ON
INTERNATIONAL TAXATION( ICAI)
CERTIFICATION COURSE ON IFRS (
ICAI)
E-MAIL :
NITINMPATHAK@GMAIL.COM
MOBILE: +91 9825804094

2. NATIONAL PENSION SCHEME
Regulation: Administration
1. Regulated by PFRDA, a Prudent Regulator created
by Government of India.
2. Funds are managed by funds managers from
Public & Private sector with proven track record.
3. Stock Holding Corporation of India Ltd, functions
as custodian for NPS.
4. 12 digit unique number called PRAN(Permanent
Retirement Account Number)

4. NATIONAL PENSION SCHEME: TAX EFFECT
 Contribution to NPS is allowable as deduction u/s
80CCD(1) up to Rs.1.5 lakhs under sec 80
CCE/80C
 Subject to the following ceiling :
 A. (i) For salaried employee 10% of his salary
 (ii)Non salaried employee 20 % of his gross total
income
 B. Further deduction u/s 80CCD(1B)
 Additional deduction up to 50,000/-

5. NATIONAL PENSION SCHEME: TAX EFFECT
 Deduction to NPS scheme for contribution by the
Employer u/s 80CCD(2)
 Employer contribution up to 10% of the salary of
individual is allowed as deduction
 12% of salary is allowed in case of recognized
provident fund is allowed as deduction.

6. NPS: Tax effect For Corporate model
 Corporate Model – To Employers
Contributions made by the employer (up to 10% of basic + DA)
are allowed as business expense under Section 36(1)IV(a) of
IT Act
 Corporate Model – To Employers
Employees own contribution is eligible for tax deduction under
Sec 80 CCD(1) of income tax Act up to 10%of salary (basic+
DA).this is within the overall ceiling of Rs.1.50 lacs under sec
80 CCE of IT Act
 Employee also gets tax deduction for the contribution made
by the employer under Sec 80 CCD (2) of IT Act up to 10% of
salary (basic+ DA) which is in addition to the tax benefits
available under Sec 80 CCE.

7. TAXABILITY U/S 80CCD(1B)
 An additional deduction for the investment up
to Rs. 50,000 in NPS (Tier I account) has been
exclusively available for NPS under subsection
80CCD (1B).
 This is over and above the deduction of Rs. 1.5
lakh available under sec 80C of Income Tax Act.
1961.

8. TAXABILITY U/S 80CCD(3)
Situation Taxability
1. On the death of Assesses
- A/c close or opting out of
the pension scheme
- Pension from annuity
Exempt
Taxable
2. Otherwise Taxable

9. TAXABILITY U/S 80CCD(3)
Type of Investment, Withdrawal,
Accretion, Annuity
Exempt or Taxable
Investment in NPS Deduction from Income U/s
80CCD(1) & (1B)
Accretion in NPS Exempt
Withdrawal before 65 years Taxable
Withdrawal at the time of maturity
between 65-70
40% of accumulated fund is Exempt
& 60% of fund invested in annuity
is Exempt Or Withdrawal taxable
Annuity receipt Taxable

10. NPS ELIGIBILITY
 NPS A citizen of India
 Resident or non-resident :Subject to the
following conditions:
 Above18 – Below 65 years as on the date of
submission of Form
 Know Your Customer (KYC) norms needs to
be taken care
 The following applicants cannot join NPS:
 Un-discharged insolvent
 Individuals of unsound mind
 Pre-existing account holders under NPS

11. DEPOSIT YOUR MONEY
 Tier-I (Pension account):
 Minimum contribution Rs.500 and 6,000 per
financial year.
 Over and above this mandated limit, you can
contribute any amount at any frequency.
 Tier-II (Investment account):
 Initial contribution of Rs. 1000.
 The flexibility to invest/withdrawal anytime
through any POP.
 Maintain minimum balance of Rs.2000 at the
end of each financial year.

12. INVESTMENT OPTION
 Choice of Scheme qua Asset class
 Asset Class E- “High return, High risk” = Equity
 Asset Class C- “Medium return, Medium risk” =
Corporate Bonds
 Asset Class G- “Low return, Low risk” =
Government Securities

13. INVESTMENT OPTION
 Choice of Approach
1. Active Choice
Subscriber decides allocation pattern amongst E, C
and G, subject to maximum as below:
Asset Class Max. Cap on Investment
Equity (E) 50%
Corporate Bonds (C) 100%
Government Securities (G) 100%

14. INVESTMENT OPTION
 Choice of Approach
2. Auto Choice
If Active choice is not exercised, it goes by age and
prescribed percentage are as per table below:

15. INVESTMENT OPTION
Age (in Years) Asset Class E Asset Class C Asset Class G
Up to 35 50% 30% 20%
36 48% 29% 23%
37 46% 28% 26%
38 44% 27% 29%
39 42% 26% 32%
40 40% 25% 35%
41 38% 24% 38%
42 36% 23% 41%

16. INVESTMENT OPTION
Age (in Years) Asset Class E Asset Class C Asset Class G
43 34% 22% 44%
44 32% 21% 47%
45 30% 20% 50%
46 28% 19% 53%
47 26% 18% 56%
48 24% 17% 59%
49 22% 16% 62%
50 20% 15% 65%

17. INVESTMENT OPTION
Age (in Years) Asset Class E Asset Class C Asset Class G
51 18% 14% 68%
52 16% 13% 71%
53 14% 12% 74%
54 12% 11% 77%
55 & above 10% 10% 80%

18. TYPES OF FUNDS IN NATIONAL PENSION
SCHEME
Class Of Fund
Invested in
Risk
E Index based Stocks Carry market risk like any
large cap equity fund
C Bonds issued by State
Govt, PSUs and Private
Firms
Going by the quality of
companies, risk would be low.
G Bonds issued by Central
Govt.
Lacks default risk but volatility
can't be avoided in long term
bonds.

19. INVESTMENT NORMS FOR ASSET CLASS
 Asset class E (equity market
instruments) – This asset class will be
invested in index funds that replicate the
portfolio of either BSE Sensitive index or
NSE Nifty 50 index.
 Asset class G (Government securities) –
This asset class will be invested in Central
Government bonds and State Government
bonds.

20.  Asset class C (credit risk bearing fixed income
instruments) – This asset class will be invested in
the following instruments:
 Liquid Funds of AMCs regulated by SEBI with the
following filters:
 AMCs are SEBI regulated, with Average total
assets under management (AUM) for the most
recent six-month period of, at least, Rs.5000
cores.
 All assets that are permitted for investment into
liquid funds by SEBI.

21. ASSET CLASS C (CREDIT RISK BEARING
FIXED INCOME INSTRUMENTS)
 Fixed Deposits of scheduled commercial
banks with following filters:
Net worth of at least Rs.500 crores and a
track record of profitability in the last three
years.
Capital adequacy ratio of not less than 9%
in the last three years. Net NPA of under 5%
as a percentage of net advances in the last
year.

22. ASSET CLASS C (CREDIT RISK BEARING FIXED
INCOME INSTRUMENTS)
 Debt securities with maturity of not less than three
years tenure issued by Bodies Corporate including
scheduled commercial banks and public financial
institutions [as defined in Section 4 (A) of the
Companies Act].
Provided that at least 75% of the investment in this
category is made in instruments having an
investment grade rating from at least one credit
rating agency.
 Credit Rated Public Financial Institutions/PSU
Bonds
 Credit Rated Municipal Bonds/Infrastructure Bonds

23. INVESTMENT OPTION:FUND MANAGERS
 Choice of Pension Fund Managers
1. ICICI Prudential Pension Funds Management
Company Limited
2. HDFC Pension Fund Management Company Limited
3. Kotak Mahindra Pension Fund Limited
4. Reliance Capital Pension Fund Limited
5. SBI Pension Funds Private Limited
6. UTI Retirement Solutions Limited
7. LIC Pension Fund Limited

24. PERFORMANCE OF INVESTMENTS ARE AS UNDER:-
 We have downloaded and shown the
performance of All Managers and All Class of
Assets.
 Equity Average for last five years i.e 12.5%
 Corporate Bonds Average for last five years i.e
9.5 %
 Government Securities Average for last five years
i.e 8.7 %

25. PERFORMANCE OF PFMS
Asset Class E- “High return, High risk” = Equity
•Average return for asset class E is 12.5%
SC
HE
M
E-
E
Tie
r-1
Pension Fund AUM
(Rs Crs)
Returns
1 Year
Returns
3 Years
Returns
5 Years
SBI Pension Funds Pvt. Ltd 1,220
6.04 9.00 9.72
UTI Retirement Solutions Ltd. 86.09
6.90 9.02 9.72
LIC Pension Fund Ltd. 2,357
5.39 8.87 NA
Kotak Mahindra Pension Fund
Ltd.
143
30.98 10.90 14.51
Reliance Capital Pension Fund
Ltd.
44.88
28.29 9.64 13.85
ICICI Pru. Pension Fund Mgmt
Co. Ltd.
560
1.32 8.09 8.82
HDFC Pension Management Co.
Ltd.
601
1.15 7.90 NA

26. PERFORMANCE OF PFMS
Asset Class C- “Medium return, Medium risk” =Corporate bond
Average return for asset class C is 9.5%
S
C
H
E
M
E-
C
Ti
er
-1
Pension Fund AUM
(Rs Crs)
Returns
1 Year
Returns
3 Years
Returns
5 Years
SBI Pension Funds Pvt. Ltd 910
5.20 9.21 9.63
UTI Retirement Solutions
Ltd.
62.16
5.13 9.28 9.72
LIC Pension Fund Ltd. 184
4.96 9.58
NA
Kotak Mahindra Pension
Fund Ltd.
94
4.96 9.53 9.78
Reliance Capital Pension
Fund Ltd.
35.40
5.85 9.39 9.92
ICICI Pru. Pension Fund
Mgmt Co. Ltd.
475
5.41 9.85 10.03
HDFC Pension
Management Co. Ltd.
467
5.50 9.49
NA

27. PERFORMANCE OF PFMS
Asset Class G- “Low return, Low risk” = Government Securities
Average return for asset class G is 8.7%
S
C
H
E
M
E-
G
Ti
er
-1
Pension Fund AUM
(Rs Crs)
Returns
1 Year
Returns
3 Years
Returns
5 Years
SBI Pension Funds Pvt.
Ltd
1606
1.65 8.27 8.58
UTI Retirement
Solutions Ltd.
95.62
0.75 7.74 8.33
LIC Pension Fund Ltd. 245 2.64 8.63 NA
Kotak Mahindra
Pension Fund Ltd.
123
1.11 8.33 8.66
Reliance Capital
Pension Fund Ltd.
52.47
1.44 8.23 8.54
ICICI Pru. Pension Fund
Mgmt Co. Ltd.
560
1.32 8.09 8.82
HDFC Pension
Management Co. Ltd.
601
1.15 7.90
NA

28. PARTIAL WITHDRAWAL FROM THE SCHEME
 You should be in NPS for at least 10 years -
Amount to be withdrawn should not exceed
25% of the contributions made by you
 The withdrawal can happen only against
specified reasons :
 Withdrawal will be allowed maximum three
times during the entire tenure of subscription
with a gap of at least five years between two
partial withdrawals.

29. WITHDRAWAL FROM NPS
Vesting Criteria Benefit
At any point in time
before 65 years
You would be required to invest at least 80% of the pension of
age wealth to purchase a life annuity from any IRDA –
regulated life insurance company.
Rest 20% of the pension wealth may be withdrawn as lump
sum.
On attaining the Age of
65 years and up to 70
years of age
At exit you would be required to invest minimum 40 % of your
accumulated savings (pension wealth) to purchase a life
annuity from any IRDA-regulated life insurance company. You
may choose to purchase an annuity for an amount greater
than 40 %.
The remaining pension wealth can either be withdrawn in a
lump sum on attaining the age of 60 or in a phased manner,
between age 60 and 70, at the option of the subscriber.
Death due to any cause In such an unfortunate event, option will be available to the
nominee to receive 100% of the NPS pension wealth in lump
sum.
However, if the nominee wishes to continue with the NPS,
he/she shall have to subscribe to NPS individually after
following due KYC procedure.

30. EXIT FROM THE SCHEME
 Subscriber can exit from the Scheme after 10 years
of account opening or on attainment of the age 65
years whichever is early. The payout will be defined
as per the exit age of the Subscriber.
Exit before the age 60 years Exit at the age 60 years
•Up to 20% of Corpus can be withdrawn in
lump sum
•Balance amount needs to be invested in
Annuity
•Up to 60% of Corpus can be withdrawn in
lump sum
•Balance amount needs to be invested in
Annuity
If the Corpus is less than or equal to Rs.1
lakh, There is no need to invest into
Annuity.
Entire amount can be withdrawn in lump
sum
If the Corpus is less than or equal to Rs.2
lakhs, There is no need to invest into
Annuity.
Entire amount can be withdrawn in lump
sum

31. TYPES OF WITHDRAWAL FORMS
Type Of Withdrawal
Request Central/State
Government
Corporate/All
Citizens of India
Sector
Swavalamban
(NPS-Lite) Sector
Superannuation 101-GS 301 501
Premature Exit
102-GP 302 502
Death
103-GD 303 503

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